“Export demand is larger than ever,” said Mark Stephenson during the January Hoard’s Dairyman webinar. Since 2004, the amount of U.S. dairy products sent overseas has been growing, and last year, 17.5% of dairy solids were exported. “Export demand has been strong, on really all dairy products in several categories,” Stephenson noted.

As the director of dairy policy analysis at the University of Wisconsin-Madison, Stephenson follows trends in exports, and he said that total exports to several customers also rose the past few years. China is a notable one, with large increases in 2020 and 2021. He said exports to the Middle East and North Africa have showed steady growth the last two years as well.

Meanwhile, production has been down in some of our biggest exporting competitors, namely New Zealand and the European Union. The world has been demanding dairy products, but most countries haven’t been able to keep pace, which means they are drawing down on stocks. That signals higher prices, Stephenson said.

There has been some friction in the export markets, with the most notable being shipping port congestion. Stephenson said it used to cost about $3,000 to send a loaded ship across the ocean. That climbed to $20,000 when there was severe congestion and high demand for empty containers. More recently, those prices have receded some, to around $12,000 per container.

Stephenson said this congestion is improving, but he anticipates it may take a few years to truly resolve. “It’s going to take time to work all of these friction points out of the supply chain,” he said. “It’s not just a dairy supply chain problem; it involves moving all products from country to country.”

Another friction point is the value of the U.S. dollar. While a strong dollar is good when buying products from other countries, that is not the case for our export sales.

Stepheson said that during times of global economic turmoil, the U.S. dollar tends to strengthen. Although it creates export friction, “It is not a problem we can’t overcome,” Stephenson noted, “but our products need to compete.”

Fortunately, Stephenson said that prices of U.S. dairy products are competitive. Prices for milk powder are always competitive, he said, while cheese, butter, and butterfat are competitive now but do experience more variation in terms of price.

Even with some friction in exports, Stepheson predicts the U.S. will pick up market share again in 2022. To hear more of his projections, watch the January Hoard’s Dairyman webinar, “The dairy price outlook for 2022: A spotlight on supply, demand, and inflation.”

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(c) Hoard's Dairyman Intel 2021
January 20, 2022
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